We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards SINA Corp (NASDAQ:SINA).
Is SINA Corp (NASDAQ:SINA) a bargain? Prominent investors are taking a bearish view. The number of long hedge fund positions fell by 2 recently. Our calculations also showed that SINA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). SINA was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 20 hedge funds in our database with SINA holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the latest hedge fund action encompassing SINA Corp (NASDAQ:SINA).
How have hedgies been trading SINA Corp (NASDAQ:SINA)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SINA over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in SINA Corp (NASDAQ:SINA) was held by HBK Investments, which reported holding $70.8 million worth of stock at the end of September. It was followed by International Value Advisers with a $41.1 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position International Value Advisers allocated the biggest weight to SINA Corp (NASDAQ:SINA), around 1.68% of its 13F portfolio. HBK Investments is also relatively very bullish on the stock, designating 0.87 percent of its 13F equity portfolio to SINA.
Because SINA Corp (NASDAQ:SINA) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of hedge funds that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Larry Chen and Terry Zhang’s Tairen Capital sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $15.7 million in stock, and Yi Xin’s Ariose Capital was right behind this move, as the fund said goodbye to about $13.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SINA Corp (NASDAQ:SINA) but similarly valued. These stocks are Rapid7 Inc (NASDAQ:RPD), El Paso Electric Company (NYSE:EE), Commscope Holding Company Inc (NASDAQ:COMM), and Spirit Airlines Incorporated (NYSE:SAVE). This group of stocks’ market valuations match SINA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RPD | 23 | 228346 | -5 |
| EE | 15 | 343255 | 1 |
| COMM | 29 | 968776 | 5 |
| SAVE | 37 | 329134 | 9 |
| Average | 26 | 467378 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $467 million. That figure was $168 million in SINA’s case. Spirit Airlines Incorporated (NYSE:SAVE) is the most popular stock in this table. On the other hand El Paso Electric Company (NYSE:EE) is the least popular one with only 15 bullish hedge fund positions. SINA Corp (NASDAQ:SINA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on SINA, though not to the same extent, as the stock returned -20.9% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
